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Print articleRetail sales and consumer law: Make sure your prices are accurate
September, 2015 - Benjamin David Gross , Luc Thibaudeau and Anne-Sophie Lamonde
The issue of accuracy in the advertising of prices by merchants is one which has received considerable attention. Quebec courts have recently considered this issue, particularly with respect to the advertised price for the use of Interac services, and in cases where erroneous prices were advertised on transactional websites.
In these cases, the courts: reasserted the strict
requirements of the Consumer Protection Act1regarding the advertising of
prices, holding that where a merchant intends to charge additional fees for the
use of a method of payment, it must include these fees in the advertised price
for the product or service being sold; sometimes allowed, sometimes barred the
defence by which merchants pleaded their mistake in the advertising of
erroneous prices on their websites. Interestingly, where the courts have found
against merchants, it was not the first time an error was made by the merchant
in the posting of the price of a product.
Debit Card User Fees Must Be Included in the Merchant’s Advertised Price
On May 8, 2015, inStratos Pizzeria (1992) Inc.v.Galarneau,2the Superior Court
held that debit card user fees must be included in the merchants’ advertised
prices. The court favored a strict interpretation of subsection 224(c) C.P.A.
stating that it prevents the merchant from adding any charges (at the time of
payment) that were not included in the advertised sale price.
This case involved a franchisor and its franchisee which provided a pizza home
delivery service. In February 2014, the franchisee received a notice of
non-compliance from the Office de la protection du consommateur (“OPC”) informing
it that it was in breach of the C.P.A. because customers were being charged an
extra $0.75 if they opted to pay for their order by using Interac. This extra
charge appeared on the menu. The OPC was of the view that these charges had to
be included in the advertised price in accordance with subsection 224(c) C.P.A.
Since the franchisor and franchisee were unable to agree with the OPC, they
filed a motion for declaratory judgment asking the court to rule on this
disputed interpretation of subsection 224(c). They alleged that Interac was a
separate service that was provided by the merchant and was not part of its main
obligation, which was to provide the food to the customer. The merchant also
argued that since customers were informed of this fee before making their
order, it could not be viewed as a higher price than that advertised.
The judge rejected these arguments and, consequently, the motion for
declaratory judgment. He found that the franchisee was not offering a separate
service to its customers by providing them with the option to pay by Interac,
but simply a method of payment. The judge quoted the ratio from the decision in
Union des consommateursc. Air Canada3and reiterated that the addition of
subsection 224 (c) C.P.A. in 2010 evidences the legislator’s wish to compel
merchants to announce to consumers at the outset the total cost of goods and
services so as to [translation] “allow them to adequately compare the prices of
the goods they are purchasing”.4It was therefore insufficient to merely state
on the advertising menus and flyers that extra charges would be added to the
total invoice when consumers pay by Interac.
COMMENTS
This decision confirms that the legislator’s goal in adopting subsection 224(c)
C.P.A. in 2010 was to strengthen consumer protection. Thus, it is important for
merchants to clearly understand the strict requirements of price advertising.
If the merchant wishes to add additional charges such as debit card fees, it is
not enough to display them on flyers or on the front page of a menu to meet the
requirements of subsection 224(c) C.P.A. Nor will these requirements be met if
the consumer agrees to pay the additional fees before making his order.
Where a merchant intends to charge fees for the use of a specific method of
payment, it may need to display two price columns in its menu — i.e. including
and not including debit card fees — for each item. In practice, this may
confuse consumers rather than better inform them, especially in situations
where they are purchasing several items at once, since debit card fees only
apply once to the total amount of the invoice and not as a function of each
item ordered.
In the recent decision of Marcottev.B ank of Montreal5dealing with conversion
charges billed by credit card issuers, it seems that the Supreme Court favoured
a more practical application of the C.P.A. to the disclosure of fees by
agreeing that conversion charges should be viewed as a consideration for a
separate service.6
The Stratos case clearly shows that one of the main purposes of the C.P.A. has
always been to disclose to the fullest extent possible the charges applied in
consumer contracts. This purpose is achieved through the application of several
provisions requiring the full communication of all the fees that may be claimed
from the consumer, including the credit charges, whether in the advertising
material or in contracts. Thus, in the case ofDirecteur des pour suites
criminelles et pénalesv.9170-2274 Québec Inc.,7the Court of Québec advocated
this strict approach in a case dealing with the disclosure of the terms of
credit in advertisements. In that case, a car dealer was thought to have
violated sections 247 C.P.A. and 84 of the Regulation respecting the
Application of the C.P.A.by failing to state the total amount of the credit
charges and the consumer’s total obligation in the contract. In its defence, it
argued that it relied on an ad posted on the vehicle manufacturer’s website and
pleaded section 287, para. 2, C.P.A., which provides that the merchant can be
acquitted “if it is established that [it] had reasonable grounds to rely on
information given by the [...] manufacturer.”8
Although the dealer was in good faith, its defence was dismissed. Due diligence
would have required that it carefully read the small print in the ad on the
terms of credit and that it verify with a qualified person as to whether or not
the disclosed information was compliant with the provisions of the C.P.A. The
case against the director of the dealer was dismissed on the grounds that such
director had no knowledge of the offence.
Errors in Advertised Prices in Contracts Concluded via the Internet
While the rules on accuracy in advertised prices are quite
strict, there are still some situations in which the courts will allow
merchants to allege a mistake in the advertised price. The decision of the
Court of Québec, small claims division, inFaucherc.Costco Wholesale Canada
Ltd9is a good example. The defendant’s website erroneously announced that the
price of a laptop computer was $2.00. Having placed an order for 10 computers
which was refused, the consumer claimed their true value as damages, alleging a
breach of subsection 224(c) C.P.A. To justify its refusal to honour the
plaintiff’s order, the merchant relied on the following clause appearing on its
website:
[Translation] We reserve the right to cancel, terminate or not process an order
(including an accepted order) if the price or any other material information on
this website is inaccurate. If we do not process an order for this reason, we
will advise you that the order has been canceled and undertake either not to
charge you for the amount of the order, or to credit you for the order,
depending on the payment method used […]
The defendant also alleged that the ridiculously low purchase price was clearly
due to an advertising error.
The judge found that the aforementioned clause entitled [translation]
“Amendments, Typos and Errors” which allowed the merchant to cancel or not
process an order was accessible through hyperlinks on the merchant’s website.
Relying on the decision of the Supreme Court of Canada inDell Computer
Corpv.Union des consommateurs,10the judge held that this clause was not an
external clause to the contract and was valid, thus enforceable against the
plaintiff.
Given the merchant’s intention not to be bound in the event of the consumer’s
acceptance of the terms advertised on its website, the ad was not an offer to
contract under article 1388 of the Civil Code of Québec.11The plaintiff could
thus not compel the conclusion of the contract by its acceptance of the terms
advertised on the merchant’s website. Furthermore, the judge found, in view of
the unrealistic price of the computers, that the defendant had committed an
obvious error which vitiated its consent within the meaning of article 1400,
para. 1, C.C.Q. Therefore, this error could not be characterized as
inexcusable.
The judge examined the effect of the second paragraph of section 54.1 C.P.A. in
respect of a “distance contract”, which reads as follows:
A merchant is deemed to have made an offer to enter into a distance contract if
the merchant’s proposal comprises all the essential elements of the intended
contract, regardless of whether there is an indication of the merchant’s
willingness to be bound in the event the proposal is accepted and even if there
is an indication to the contrary.
The judge did not apply the second part of this paragraph, but found rather
that the plaintiff-consumer had visited the defendant’s website on his own
without any solicitation by the merchant. Therefore, it was he who made the
offer to contract, while the merchant had only made a proposal. Since the
plaintiff’s offer was rejected, no sale was concluded.
Regarding the prohibited commercial practices under the C.P.A., the judge,
citing Lelièvrec. Magasin La clé de sol Inc.,12found that section 219 C.P.A.
did not apply because the merchant had not intended to mislead consumers. The
erroneous price had appeared inadvertently during the programming of the
website. Moreover, the plaintiff-consumer knew or ought to have known that the
price was wrong since it was evidently lower than actual prices advertised for
other similar products sold by the merchant. The consumer had therefore not
been misled and his action was dismissed. The court also held that subsection
224(c) did not apply in this case because the merchant had not intended to
induce the consumer to purchase computers for a price of $2 each, since it
would realistically never have offered these computers at that price.
In the case of Lelièvrereferred to above, the facts were similar to those in
the Costco case except that the clause allowing for refusal to honour an order
in case of errors or inaccuracies only appeared on the merchant’s website after
the contract was concluded. The judge, in the Lelièvrecase therefore found that
a contract had been concluded, but held that the merchant had committed an
error and therefore set aside the contract.
In the case of Néronv. Vacances Sunwing, the court reached the same conclusion
as in the Costco decision, namely that the advertised price was so ridiculously
low that the consumer ought to have known that it was not the real price.13In
theNéroncase, the plaintiff had purchased a trip for two on the merchant’s
website which was advertised for a price that was about six times cheaper than
the actual value of the trip. The merchant realized and contacted the consumer
the same day to explain to him that the advertised price on the website was a
mistake. The merchant gave the consumer two options, either to pay the difference
between the actual cost of the trip and the deposit already paid, while also
getting a travel credit of $300/person, or to cancel the reservation and obtain
the reimbursement of the deposit. Since Ms. Néron accepted neither of these
options, Sunwing unilaterally canceled the contract and reimbursed her.
Sued by Ms. Néron, who claimed damages for the cancellation of the contract,
Sunwing alleged that it had made an error in good faith on the nature of the
contract. Sunwing explained that its consent had been vitiated because it would
never have agreed to sell the trip for the advertised price if it had known of
technological error at the time the price was advertised. As in the Costco
case, the judge found that the error [translation] “could not be characterized
as inexcusable within the meaning of article 1400, para. 2, C.C.Q.”14and thus
that Sunwing did not have to offer Ms. Néron the trip for the advertised price.
Considering the application of the C.P.A., the judge reiterated what was said
in the Costco case, namely that the purpose of subsection 224(c) C.P.A. is to
[translation] “prevent a merchant from deliberately advertising a price to
generate consumer interest and, once interested, to try to get them to buy at a
higher price.”15
About one year after the decision in Néron, the courts considered substantially
the same facts in the cases of Comtoisv. Vacances Sunwing
Inc.16andMeyerv.Vacances Sunwing Inc.17and issued relatively identical
judgments in these two cases. However, in both these cases, while the court
found that the merchant did in fact make a mistake, this time it characterized
it as inexcusable. Indeed, the repetition of the mistake in the advertised
price was found to demonstrate gross negligence on the part of the merchant,
enabling the mistake to be characterized as inexcusable under article 1400,
para. 2, C.C.Q.
The court explained that [translation] “[the] consumer is justified in
presuming that a product has gone through a serious price verification process
before being offered for online sale to thousands of people.”18The court
therefore ordered the merchant and the agency through which the consumer
purchased the trip, solidarily, to pay the difference between the advertised
price and the actual price of the trip.
In Roche for tv.Vacances Sunwing Inc.,19a decision rendered exactly one month
after those of Comtoisand Meyer, and based on very similar facts, the court
again found that the merchant had made an inexcusable error because of the
inaccurate price advertised on its website. However, in contrast to the order
rendered against the merchant and the agency in Comtois and Meyer, in this
case, the court ordered the merchant to pay the amount of $1,000 per plaintiff
in moral damages because the [translation] “Court cannot order the defendant to
pay the plaintiffs for the cost of a trip which they will not be making.”20
Finally, in the case of Charest-Corriveauv.Sears Canada Inc.,21the court
refused to excuse the error of a merchant who had mistakenly posted a price of
$12.99 on its website for a game module, whereas the actual price was $129.99.
In a succinctly worded decision, the judge, considering the severity of the
law, ordered Sears to pay the plaintiff damages equal to the difference between
the advertised price and the price subsequently requested, which represented a
lost value to the plaintiff. Acknowledging the merchant’s good faith and the
nature of the error which was due to a misplaced decimal comma, the court
refused to award any further damages.
COMMENTS
The decision in the Costco case clearly shows that a certain degree of
knowledge must sometimes be imputed to consumers, even if they are generally
deemed to be “credulous and inexperienced”.22One can also conclude from this
decision and the others rendered contemporaneously that the average consumer
may easily notice some information while reading an advertisement or surfing
the web, even if they “take no more than ordinary care to observe that which is
staring them in the face.”23These decisions also teach us that despite the
strict requirements of the C.P.A., courts may not favour a literal application
thereof where same would enable a consumer to profit from a merchant’s obvious
mistake. Indeed, section 54.1 C.P.A. expressly provides that the merchant is
deemed to make an offer to enter into a contract where the offer comprises all
the essential elements of the intended contract,even if there is an indication
that the merchant is not willing to be bound in the event of the consumer’s
acceptance. Despite this, it still seems possible to plead that it is in fact
the consumer that is making an offer to contract by visiting the merchant’s
website on his own initiative. Though, in the Sears decision, the court kept to
the strict application of the C.P.A., not accepting the defence of an error
made in good faith.
In Lelièvreand Costco, neither merchant was guilty of misrepresentation as
neither had the intention to mislead consumers. Nevertheless, the Court of
Appeal, citing Professor Nicole l’Heureux in the case of9070-2945 Québec
Inc.v.Patenaude,24clearly stated that [translation] “the intention to mislead
of the person making the representation is not a factor that the court should
take into consideration.”25
To clarify the confusion, it may be useful to recall the
following words of Justice Marc Beauregard of the Court of Appeal which,
although written in 1981, are still clearly relevant today:
[Translation] The purpose of the Consumer Protection Act is to protect
consumers from practices that are considered abusive and not to give consumers
the means for getting out of their obligations by pleading technicalities.26
Finally, while the courts have sometimes strayed from their pro-consumer
approach, such as in Costco and Lelièvre, merchants should still remain vigilant
in the posting and advertising of prices. In many cases, the Price Accuracy
Policy will enable the consumer to demand compensation from the merchant where
a higher price than the advertised price is charged at the cash register. The
law remains the law. As the Searscase reminds us: dura lex, sed lex.
Furthermore, the Sunwing decisions commented on above remind us that there is
no forgiveness for repeat offenders.
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